After losing a $20 million state liquor marketing contract because of a misplaced decimal point on its application, Pine State Trading Co. was the only firm to rebid for the contract, Maine officials said Friday.
Dirigo Spirit, the company that challenged Pine State’s initial contract, did not submit a second bid.
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“The deadline came and went, and the only proposal the state received was from Pine State Trading Co.,” said David Heidrich Jr., spokesman for the Maine Department of Administrative and Financial Services, which oversees the marketing and sale of liquor.
Ford Reiche, president of Dirigo Spirit, said a change in the state’s marketing strategy made the contract less appealing.
“The state rewrote the (request for proposals) … and they reduced their emphasis on recovering sales that we lost to New Hampshire,” Reiche said.
He was not willing to criticize state officials for removing the one key element of strategy that he believes made the contract worth pursuing, despite the time, money and effort Dirigo Spirit expended on fighting for the contract.
“I think that’s the only comment I want to make,” Reiche said.
Since it was a clerical error that caused Pine State Trading’s contract to be revoked, it is reasonable to expect that the company will win the contract a second time, Heidrich said. However, it is not a foregone conclusion.
State officials will evaluate the company’s new proposal, Heidrich said, although there is no set time frame for making a decision.
Pine State Trading, a Gardiner-based distribution company, was awarded the 10-year contract on Feb. 21 to market Maine’s state-run liquor business, which is projected to bring $450 million in revenue to the state over the 10 years. Anticipating increased revenues from liquor sales, the state sold a bond last fall and used the proceeds to help reimburse Maine hospitals that were owed more than $180 million.
But in June, the state nullified the contract because Pine State Trading had misstated its activity in New Hampshire’s liquor market.
A letter signed by Gregory Mineo, director of the Bureau of Alcoholic Beverages and Lottery Operations, said the error involved Pine State Trading’s share of the liquor market in New Hampshire. The company sold 8,000 cases of liquor in New Hampshire in 2013, which was 0.4 percent of the 2 million cases sold wholesale. But in its bid for the Maine contract, Pine State Trading said its market share in New Hampshire was 0.004 percent.
The difference was relevant because in 2012, lawmakers rewrote the law governing the state-run liquor business to try to regain sales lost to New Hampshire. The state’s request for proposals did not automatically disqualify companies that do business in New Hampshire, but bidders had to disclose the extent of that business.
The misplaced decimal point inaccurately minimized the amount of business Pine State Trading had been doing in New Hampshire.
Company CEO Nick Alberding acknowledged at the time that the error had been made, but he said it was done unintentionally and was “minuscule,” since 0.4 percent of New Hampshire sales is still a tiny amount.
Alberding did not return a call seeking comment Friday.
Dirigo Spirit, a Cumberland-based company that also bid on the liquor marketing contract, used the error as a central argument when it appealed the award to Pine State Trading in late February.
An attorney for Dirigo Spirit said at the time that the discrepancy was significant, and that it exposed an inherent conflict of interest for Pine State Trading.
The liquor marketing contract that Pine State Trading won is worth 1.5 percent of the annual net sales of spirits in Maine, which totaled $142 million in 2013. That means the marketing contract is worth about $2 million a year.
Pine State Trading already has a separate, more valuable contract for liquor distribution and warehousing, which it received from the state in early January.
The contract for distribution and warehousing is worth 4.7 percent of annual net sales, nearly $6.7 million a year.
In the past, Pine State Trading has handled liquor distribution and warehousing as a subcontractor for Maine Beverage Co., which received a lucrative 10-year liquor administration contract from the state in 2004. That contract expired June 30.
Maine Beverage chose not to reapply for the 2014-2024 contract.
The $450 million in wholesale revenue that the state is projected to receive over the life of the new contract is more than double the amount under its former agreement with Maine Beverage. In September, the state sold a $220 million bond that will be repaid with revenue from the new liquor contracts. The proceeds of the bond offering were used to repay $183.5 million that the state owed to Maine hospitals.
Staff Writer Whit Richardson contributed to this story.
J. Craig Anderson can be contacted at 791-6390 or:
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